Payroll

Q. How frequently must salary be paid in Saudi Arabia? 

According to Article 115 of the Labor Law, wages must be paid:

• At least once a week for daily-rated workers
• Once a month for monthly-rated workers
• At least once a week for piecework that takes longer than 2 weeks, with the full balance paid within a week of completing the work
• At least once a week in all other cases

Q. What is the minimum salary in Saudi Arabia? 

Saudi Arabia has a two-tiered minimum wage system:

• Saudi Nationals in the Private Sector:  The minimum monthly wage is 4,000 Saudi Riyals (SAR), effective as of 2024. This increase aims to encourage Saudis to participate in the workforce.
• Expatriates in the Private Sector: There is currently no mandated minimum wage.  Expatriate salaries are typically determined by negotiation, considering experience, qualifications, and the market rate for the specific position.
• Public Sector: All public sector employees, regardless of nationality, receive a minimum monthly wage of 3,000 SAR.

Also read: What is pay period?

What deductions can legally be taken from an employee's wages in Saudi Arabia? What are the limits?

Article 120 states that deductions can only be made to recover advances paid in excess of rights (max 10% of wages), social insurance premiums, savings fund contributions, and instalments for house construction/ownership transfer plans. The total deducted cannot exceed 50% of wages unless approved by the Commission and cannot exceed 75% in any case

Also read: What is holiday pay? 

What are the laws around late wage payments by employers in Saudi Arabia? What penalties can apply?

Under Article 121, if wages are delayed without justification, a fine of up to double the outstanding wages can be imposed on the employer. This is ordered by the Commission and collected through administrative channels.

How are wages and pay determined for roles with no clear pay scale in Saudi Arabia?

Article 123 states that if no wage is specified in the contract, law, or work rules, the wage should be based on the rate for similar work. Otherwise, the Commission determines a fair wage based on standard practices and equity. The same approach applies for determining the scope of work.

What are the standard rules around penalties, fines, and discipline procedures for employees in Saudi Arabia?

Under Article 125, establishments with 20+ employees must have written penalty/reward rules approved by the Minister of Labor. 

Fines cannot exceed 5 days' wages and suspensions cannot exceed 5 days without pay per offense. Penalties can only be imposed after examining the employee's defence, as stated in Article 126.

What is the process for employees to dispute penalties or wage deductions in Saudi Arabia?

As per Article 126, employees can object to penalties before the Commission within 1 week, and the Commission must issue a decision within a week. They can apply to the Commission for wrongful deductions to order repayment and impose fines on the employer as per Article 121.

Also read: What is payroll deduction?

What payroll calculation rules apply for overtime pay, commissions, bonuses, and allowances in Saudi Arabia?

Overtime (exceeding 48 hours per week) must be paid at 150% normal salary as per the Labor Law Article 60.

Commissions, bonuses and allowances are considered part of wages if specified in contracts/work rules or paid regularly as a matter of standard practice, mentioned in Article 124.

What are the employer and employee contribution rates for social insurance tax in Saudi Arabia?

The employer contribution rate is 12%. The employee contribution rate is 10%.

What is the minimum wage per month in Saudi Arabia?

The monthly minimum base salary is 4,000 SAR.

How is severance pay calculated in Saudi Arabia?

Severance pay (EOSG) is based on the employee's final salary. Entitlement depends on years of service:

• 1/3 salary if 2-5 years
• 2/3 salary if 5-10 years
• Full salary if 10+ years (information provided)

 What is the standard VAT rate in Saudi Arabia and what types of goods and services are subject to it?

The standard VAT rate is 15%. It applies to the sale of goods and services unless explicitly exempted.

 What are the income tax rates and rules for both Saudi nationals and foreign workers in Saudi Arabia?

There is no personal income tax in Saudi Arabia - employment earnings are not subject to tax for nationals or foreign workers.

 What are the standard working hours per week and policies around overtime pay in Saudi Arabia?

The standard week is 48 hours over 5 days. Overtime hours worked in excess of this must be paid at 150% of normal wages as per the Labor Law Article 60.